Pushing Back Against Anti-ESG and Climate Change Laws

The two largest companies that provide advice to institutional investors on how to vote their corporate proxies are fighting back against a Texas law that would limit their ability to advise clients on environmental, social and governance practices. Institutional Shareholder Services (ISS), which advises about 2,000 clients for more than 51,000 shareholder meetings, and Glass Lewis, with than 1,300 clients, both filed suit in July to block Texas Senate Bill 2337 that was scheduled to take effect on September 1.

In our Top Stories for the issue, the law firm Gibson Dunn reports that on August 29, the U.S. District Court for the Western District of Texas entered a preliminary injunction blocking enforcement of the new Texas law until a trial is held, which is set for February 2, 2026.

According to Gibson Dunn, SB 2337 “will impose extensive public and directed disclosure obligations on proxy advisory firms when their recommendations or services are based on non-financial factors, which include environmental, social and governance (ESG) and diversity, equity and inclusion (DEI) considerations, diverge from company management’s recommendations, or provide conflicting advice across clients.”

In their lawsuits, ISS and Glass Lewis argued that SB 2337 is unconstitutional since it would violate the First and Fourteenth Amendments to the US Constitution by “forcing the proxy advisors to state that recommendations inconsistent with management or incorporating ESG/DEI are not in shareholders’ financial interest.”

Reuters reported in July that the proxy advisors said the new law was an attempt “to force proxy advisers to broadcast Texas' preferred viewpoints when their own differed, including on hot-button issues that a Republican state legislator perceived as having a ‘hard left bent.’"

The State of Texas, under the leadership of Governor Greg Abbott and Attorney General Ken Paxton, who is running for U.S. Senate, has been at the forefront of Republican efforts to attack ESG and DEI programs at corporations, schools and in government. The state passed a law in 2023 banning DEI offices at public universities and colleges and this year passed a law, which is being challenged by the ACLU, to ban DEI programs in K-12 schools.

In our other Top Stories, Reuters and NPR report that state attorney generals and leading environmental and scientific groups are pushing back against the proposal by the U.S. Environmental Protection Agency to invalidate the 2009 Endangerment Finding -- which underlies regulations for controlling greenhouse gas (GHG) emissions. Reuters reported that Arizona Attorney General Chris Mayes said, “the EPA is proposing to bury its head in the sand and ignore the mounting costs of climate change for all Americans.”

NPR reports that in August, the Environmental Defense Fund and the Union of Concerned Scientists filed a lawsuit against the U.S. Department of Energy and the EPA alleging that the government’s report used to support its proposed repeal of the Endangerment Finding was unlawful since it was created in secret. Public comments regarding the proposed EPA repeal of the Endangerment Finding can be submitted through September 15, with instructions available here.

The G&A team will be closely following the legal battles in Texas and in Washington and are available to answer questions about the impact on your ESG and sustainability programs. For more information contact us at: info@ga-institute.com.

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.